Which of the following is not correct?
a. When developing economic theories, graphs offer a way to visually express ideas that might be less clear if described with equations or words.
b. Graphs are one way of expressing the relationships among variables.
c. When studying the relationship between two economic variables, graphs allow economists to draw indisputable conclusions about causes and effects.
d. When analyzing economic data, graphs provide a powerful way of finding and interpreting patterns.
c
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A positive externality clearly occurs when
A) a person behaves in the public interest. B) a person's action unintentionally benefits other people. C) a person behaves only with courtesy and social grace. D) a person couldn't care less about anybody else.
The Gini coefficient is measured by
A) summing up the total income earned by the population and dividing by the size of the population. B) summing up the cumulative income percentages on the Lorenz curve. C) using the formula: area between the line of perfect equality and the Lorenz curve ÷ the area under the line of perfect equality. D) using the formula: area between perfect inequality and Lorenz curve ÷ area between the line of perfect equality to the Lorenz curve.
Discuss four problems with the CPI. Does the CPI tend to overestimate or underestimate the true inflation rate? How big is this bias?
What will be an ideal response?
Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?
A) Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations.
B) I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits.
C) Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions.
D) I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions.